Goldman Just Proved You Don't Need To Pay Bankers An Insane Amount Of Money To Keep Them

Goldman Sachs has always prided itself on leading the investment-banking pack in terms of compensation. Because it's richer and more successful than anybody else, it can pay more than anybody else can afford, forcing them to spend money that would be better used elsewhere on bonuses. That in turn improves its competitive position. It's a bit like the US-Russia arms race during the cold war.

But now Goldman has done a stunning U-turn, putting aside exactly $0 for compensation in the fourth quarter, and bringing its compensation ratio for the year down to an all-time low of 36%. By contrast, the same ratio at seemingly-struggling Morgan Stanley is 62%.